A key essence and aim of segmentation and clustering is to maximize the return on marketing investments by directing marketing efforts towards those more likely to respond favorably, and reducing marketing efforts to those less likely to respond favorably.
To maximize the effectiveness of segmentation and clustering methodologies, the marketer must have a means of differentiating those more likely to respond. Many techniques exist for differentiation, including techniques related to geographic factors (e.g. determine those living near existing customers), demographic factors (e.g. determine those with high incomes, or those with children in the household), and psychographic/lifestyle factors (e.g. determine those who have active lifestyles, those who engage in crafting, or those who attend church regularly).
Once the differentiating factors are identified, the marketer's next challenge is to determine, given the communication medium selected, how best to reach the desired prospects with a minimum of waste. This can include purchasing advertising time on certain television stations or during certain programs watched disproportionately by the desired prospects, purchasing mailing lists of subscribers to magazines that serve the desired customers' interests, concentrating advertising in local newspapers in selected geographies, and many other means. It could also include adjusting the positioning/messaging of the product or service being marketed to align better with the behaviors and attitudes expressed by the desired prospects, selecting merchandise and store locations more likely to appeal to the desired prospects, and other applications.
Among the methods available to marketers to identify likely purchasers are those methods known as “clustering”. These methods assign households or individuals to one of a number of discrete segments or clusters based on a statistical “best fit” methodology that takes into account a number of the factors above.
In all of the above methods described, any success achieved by the marketer is a function of presumptions and correlations. For example, a sporting goods marketer may achieve better results by mailing to subscribers of Sports Illustrated than by mailing to subscribers of Time, because readers of Sports Illustrated are more likely to participate in sports (that is, there may be a better correlation between reading Sports Illustrated and sports participation than there is with reading Time). However, results are relative, and the actual response may be small. Many readers of Sports Illustrated are spectators, not participants. Many others are participants, but not necessarily users of the sorts of products sold by the sporting goods marketer.